ProSiebenSat.1 Media SE

Stefanie Rupp-Menedetter – Group Spokeswoman & Head of Corporate & Finance Communication Max Conze – Chief Executive Officer Jan Kemper – Chief Financial Officer

Good morning, everyone. We have lots of news today.

I’ll go with strategy update, our new financial policy and the Q3 results. Max Conze, our CEO; and CFO, Jan Kemper, will lead you through this presentation today.

Now I hand over to Max.

Good morning. This will be a busy session as we take you through Q3 outlook for the year, and importantly, our strategic view for the future.

We will provide full depth at Capital Markets Day in a week, which I really encourage you to attend so that you can understand our total plan and the team that will deliver it. But I decided for maximum transparency to already give you quite a deep high-level view today.

This way, we can also take your questions onboard, and I think provide a better Capital Markets Day. I’ve now been in the business for 150 days, spend lots of time with our viewers, agencies, advertisers, our teams everywhere, industry peers, investors, journalists and so on.

I am very confident that we can create an amazing future for ProSiebenSat.1, and I will show you how. This is a company that has done many great things in the past, but also lost a bit of its focus on the consumer and customer, became too complicated and siloed, and we have to improve our performance and execution culture.

So there is a need for change and reset and to get much, much better in executing and delivering on what we promised. Media, and we need to evolve from a B2B to much more of a consumer-focused business with a strong technology engine to lead change and not be dragged.

Now my DNA is consumer tech. And if you want transformation growth, and so I was brought in for this.

There’s some pain we’ll have to take, but also encouraging proof points that our reset is taking hold and plenty to come. Entertainment is gaining ratings and competitive position for the first time in many years.

NuCom is delivering dynamic organinc growth behind a sharper focus. We’re making a decisive bet on digital and OTT.

We’re in midst of reorganizing ProSiebenSat.1 for future success. Clear leadership across all 3 segments with a leaner broad structure all at one table to drive performance, one entertainment setup versus different TV, digital and so-on teams.

And we’re beginning to simplify how we operate, drive performance culture, take out costs and efficiencies and invest for growth. More to come, but I am encouraged by the deep passion our people have to win.

Now on Slide 5. Let me cover business hand.

Q3 was marginally better than our expectations with revenues up 1% all in and up 4% organic. Adjusted EBITDA declined minus 13% to program cost facing this was as anticipated in indeed marginally better than in our forecast and the same rationale impacted adjusted net income.

Now onto our three pillars on Page 6, for Q3, we see encouraging progress on income with 14% organic for the quarter and low-double digit growth for year-to-date. The partnership with General Atlantic is working well.

And just now the acquisition of eHarmony is a good deal with much upside. It’s a rich target pipeline.

We have very clear in focus strategy for growth I will discuss later. Red Arrow Studios also performed better with plus 14% organic in Q3, after two rather disappointing quarters.

As work to be done to generate reliable top and bottom line growth and clarify our priorities for the future. And again, I’ll comment on this later.

Entertainment, which is the critical core of our business came in at minue 1.5% in Q3 on a like-for-like basis. I’m pleased about better and more local programming with TV ratings, performance well ahead of last year and competition in indeed August the best in three years.

We have more digital footprint from Celebrity Big Brother to the voice and the clear programming strategy and one entertainment team put in place, so we can drive one agenda from programming to digital to monetization. Clearly, we’re not yet translating this into the advertising growth we aim for, but we have a game plan for 2019 that we’ll talk about later on.

Higher ratings will help us in 2019, but take time to translate through. Our Q3 quarterly ads were flat, market was marginally negative and our critical digital and non-TV revenues are not yet developing in the way we want.

Now onto Q4 on Slide 7. As you know, our forecast for the year was at the thin margins of guidance, and I commented on this in Q2.

The advertising market provides much less visibility and more swings than in the past, which makes forecasting our business a mighty challenge. We’re changing how we operate to reflect this for 2019.

October was in line with expectations, but 30% of the year hangs on November, December performance. And while the team will do everything to deliver against the targets with current booking forecast, I need to lower full year revenue guidance for organic a.k.a.

like-for-like for mid- to low single digit. This will flow through on reported and slightly negative, and Jan will comment on EBITDA impact and expectations.

We expect double-digit organic growth for both NuCom and Red Arrow studios in Q4. On Entertainment, the advertising market in Q4 looks quite soft, and we expect our organic entertainment performance to be low single-digit negative.

Clearly, not acceptable as we look to the future, and we’ll talk about how we plan to change this. With this, I hand over to Jan, and I’ll be back in a bit to talk about our future.

Thank you, Max, and also welcome from my side. Let me start with our group financials at a glance on Page number 9.

Q3 saw the anticipated swing-back for the group overall. Thanks to a dynamic development of both the content production on global sales and the commerce segment, portfolio and currency adjusted group revenues increased by 4%.

Despite deconsolidation and negative currency effects, reported group revenues still increased by 1%. Revenue growth in the first nine months declined by 3%, which reflects meaningful deconsolidation effects, adverse FX effects as well as weak content production business in the first six months of the year.

As already indicated in previous earnings calls, group adjusted EBITDA was affected both in Q3 and the first nine months of the year by a front-loaded programming cost increase, which also translated into a decline in adjusted net income. Let’s get into more details with regards to the segments on the following pages.

External entertainment revenues were down by 3% in Q3 and 1.5% on a like-for-like basis. In the first nine months of the year, revenues declined by 1%, reflecting a challenging advertising environment.

TV advertising revenues remained stable for the segment. In Germany and Austria, we were able to increase our TV ad share in the third quarter compared to first half of the year.

Our strong ratings performance helped, with August being the best month and Q3 being the best quarter in three years despite the World Cup in July. Here, the continued gradual shift to local content had a positive impact on the ratings development.

We have a strong format pipeline for the upcoming month, especially with new local formats, which will also lead to the U.S. content rights overhang in the years to come, which Max will elaborate on a bit later.

As highlighted in the press release, we are currently in negotiations with the studios to improve conditions for the remaining periods. We were, however, not able to translate the good ratings performance and stronger performance grades overall in higher-edged revenues yet.

Advertising revenues were down 2% due to lower online advertising in SevenVentures revenues. Although the online advertising business improved in Q3 compared to the first half of the year, the loss of Sport 1 still led to a decline.

One remark toward distribution business. While the subscriber base distribution business has again benefited from an increased HD and mobile subscriber development, the seasonality of regular onetime payments just led to a flat development in Q3.

Other revenues grew underlying double digits, but were down EUR 7 million in Q3 due to the deconsolidation effect of maxdome and 7NXT in the amount of EUR 60 million. Let me also highlight that we successfully launched our netID, with 60 partners already signed, for example, the auto group, Zalando, [indiscernible] The integration of netID into TV channels websites and [indiscernible] is a key element of our entertainment strategy with potentially 35 million users are ready to register and are locked in on our sites.

In terms of profits, our third quarter was as indicated affected by deviating seasonality of programming costs. Let’s have a look on our Content Production & Global Sales segment on Page 11.

We achieved a strong 14% revenue growth in Q3 on a like-for-like basis with all areas contributing to this development. Studio71 made the largest contribution to the revenue growth, but also the production business with, for example, the fifth season of Harry Bosch contributed to the positive segment development despite an ongoing challenging environment.

Our global sales business benefited from the first time consolidation of Gravitas. Adjusted EBITDA declined by EUR 4 million in the third quarter and by EUR 1 million in the first 9 months due to temporarily lower profitability in our global sales business.

However, adjusted EBITDA margin in the first nine months was stable. On Page 12, I would like to run you through the development of our commerce segments.

Our NuCom Group achieved a strong 14% growth on a like-for-like basis and even show a further improvement compared to the first half of the year. Almost all assets contributed to the dynamic organic growth, especially Flaconi, Verivox, Windstar and [indiscernible] On a reported basis, Q3 is still affected by deconsolidation effects of Etraveli and [indiscernible] on a partly counterbalance by the consolidation of Jochen Schweizer, all recognized in digital services.

Adjusted EBITDA was still affected by the before-mentioned deconsolidation effect, a new media contract as well as certain cost seasonality. Let’s have a closer look on the acquisition of eharmony which was announced about a week ago.

Please turn to Page 13. We are really glad about that acquisition.

We acquired the asset at an enterprise value of USD 85 million, thus, for less than onetime revenue market. Overall, cash contribution for ProSieben will be at around EUR 60 million to EUR 65 million, including the cash purchase and restructuring expenses on a pro rata basis.

Through this acquisition, PARSHIP ELITE becomes the number two in online matchmaking globally based on revenues. eharmony is a pioneer and one of the leading matchmaking platforms in the U.S., With the experience of PARSHIP ELITE Group, we will increase the customer lifetime value and will achieve meaningful cost synergies of around EUR 20 million., for example, through the integration of eharmony in the IT system of PARSHIP ELITE Group and through centralizing the online marketing teams.

PARSHIP ELITE Group management team already proved their ability to integrate and scale, and we are convinced that they can achieve this again. 2018 pro forma revenues of PARSHIP ELITE and eharmony combined will be above EUR 200 million in revenues and EUR 30 million in adjusted EBITDA.

Page 14 will give you an idea of the track record of PARSHIP ELITE Group. Since the merger of PARSHIP and ELITE in 2015, the EBITDA CAGR was 42% over the last three years by improving the customer lifetime value and by reducing SG&A cost of above 10%.

We were able to increase profitability significantly. The acquisition of PARSHIP ELITE Group by ProSieben in 2016 even fostered this development.

On Page 15, I would like to comment on our net debt and financial leverage development as of September 30. Compared to the end of Q2, our net debt remained almost stable at the level of EUR 2.2 billion.

The increase of around EUR 300 million compared to the end of Q3 2017 is especially based on the dividend payment and M&A CapEx, which couldn’t be fully offset by the free cash flow before M&A. And sequentially, our financial leverage, thus the net financial debt to adjusted EBITDA ratio is at the level of 2.1 times versus the 1.8 times at the end of the third quarter last year and is well within our leverage target range of 1.5 to 2.5 times.

As I already mentioned, our free cash flow in the second half of 2018 has impacted by a meaningful amount of payments related to the efficiency measures and potential cash cost related to the ongoing studio negotiations. Moving to Page 16, let’s have a look towards the year-end.

Despite the nice win back in revenue growth in the third quarter of the year, we updated our financial outlook for financial year 2018. This has two reasons: First, a softer organic revenue development anticipated for Q4; and second reason, deconsolidation effects.

Meaning maxdome, 7NXT and tropo has already communicated at our Q2 earnings call. In Q4, those deconsolidation effects will be around EUR 50 million net.

As a result, we expect group revenues in the amount of approximately EUR 4 billion. And adjusted for portfolio changes and currency effects, group revenues are expected to increase low single-digits percent.

As in every year, the advertising business remains the big swing factor at the end for both revenues and profits. For both the Content Production & Global Sales and Commerce segments, we expect the continuing dynamic revenue growth of above 10%.

In terms of Q4 profitability, we expect an adjusted EBITDA margin in the range of 28% to 32%. This rather wide range reflects a still quite low visibility in terms of the development of the advertising business, both in November and December.

We maintain the profitability of our group and can confirm an unchanged adjusted EBITDA margin guidance in the mid-20s as well as an unchanged adjusted EBITDA to adjusted net income conversion of about 50% though at the lower absolute basis. With this, I will hand over to Max who will give you a sneak preview of our new strategy to be presented at our Capital Markets Day on November 14.

Thanks, Jan. So despite an encouraging Q3, clearly 2018 will not be the year to write home about.

We need to make the reset now to deliver what you and all of us want: growth, reliable performance with a 10% to 15% total shareholder return on an annual basis. This will require careful investment, better balancing how we use cash for growth and dealing with U.S.

content legacy issues, then providing you with a clear path to growth, building blocks, and most importantly, getting us fit to deliver what we promised consistently. Now on Slide 18, let me start with what you have taught me or asked me.

How will we create a future fit entertainment set-up? Will you reduce U.S.

content dependency and generate growth as TV reach its challenge? How do we own more IP and production going forward?

What is the forward path for NuCom? And how do we provide more clarity and execute better?

On to Slide 19. Now I commented on this in the beginning.

150 days in, I find ProSiebenSat.1 very much a glass half-full. Yes, we’re not going as we want.

Yes, we have the U.S. content overhang.

Yes, we do not execute well enough. But also, yes, we have much more strength to build future growth on, powerful and beloved entertainment brands with fan communities of 10 million and more and strong digital assets.

E-commerce and platform brands, 35 million consumers love and use an exciting content production and digital champions. We’re trading at around 20% discount to European peers, a 30% discount to U.S.

peers, yet I’m convinced are better placed if we use our strength decisively to create the future. Now this strategy when you were – has no white rabbits or hats.

Indeed, many concepts are obvious, but if we execute on them, we will win. On to Slide 20, just three data slides to set the scene.

Now on 2020, a statement of the obvious. How people consume entertainment is changing, more digital, more subscription services, more on all devices.

Now for all of us, actually, are rather golden age to enjoy. On Slide 21.

While online video and video on demand is going fast, TV still has strong resilience. And given Germany is largely a free-to-air market, I would expect better resilience as UK or U.S.

We’ll talk about our growth model later, but I’m fundamentally assuming a negative to flat underlying market where we deliver growth by a more local programming, more digital reach and smarter advertising products. Slide 22 is important.

What I’m showing you are the three markets we compete in, all Germany only for simplicity. Advertising is a EUR 21 billion market, of which we have about a 10% share, and that’s not counting all the promotion budgets out there, which I’m guessing would double that number.

Entertainment. So everything we consumed from rock concerts to Spotify is a EUR 36 billion market, of which we have very little indeed.

And e-commerce platforms are EUR 60 billion market, of which again our market share is small. So all in, close to EUR 120 billion.

And at EUR 4 billion revenue, we have about a 3% share of the space we competed. Now why does this matter?

Well, if there’s one thing I’ve learned in 25 years in business is that if you want to grow, you pick the biggest available space making you the smallest because turning, say, our 3% market share into 4% or 5% or 6% does not sound crazy. But of course, if you do, in reality, EUR 4 billion becomes EUR 5 billion or EUR 6 billion or EUR 7 billion fast.

If we want to grow, then we must access more of that market, capture more advertising via digital reach and [indiscernible] products, build more meaningful subscription and direct-to-consumer entertainment products, more e-commerce, non-easy, but all doable. On Slide 24, let me turn you to our vision for the future.

We see the consumer and viewer in the middle with entertainment and content consumers love and commerce platform brands consumers heat, synergistic and brought to life across all channels for more reach and absolute and better monetization. We’ve got our fixed principles as lightning rods for our teams, consumer [indiscernible] obsessed, contend-led, digital first, total reach, growth-driven and passionate creators.

On slide 25, what does all this mean in numbers? Well, our ambition is to accelerate growth.

And over 5 years or so, turn EUR 4 billion of revenue into EUR 6 billion, EUR 1 billion of adjusted into EBITDA into EUR 1.5 billion, and then it’s really up to you and the markets to determine the equity value of this. We will do this by diversifying our business base so that half of all business is an advertising and half of all business a non-advertising revenue half of or more in digital and 25% in smart advertising products.

By smart advertising products, I mean making linear in digital inventory target based on data insights, thereby creating more value for advertisers and a strong value uplift of up to 50% to 150% for us. All in, we aim to deliver a 10% to 15% total share of the return on an annual base.

If you turn to Slide 26, the strategic priorities across our three pillars a clear. Red Arrow Studios will become a bigger feeder of German entertainment and we will scale our digital footprint.

Entertainment will be more life, more local with a massive expansion of digital reach. All turned into smart reach and advertising products that’s capture more of that $21 billion advertising market.

NuCom will focus on verticals that’s of large and fundamental consumer needs with number one or two brands building on a salable market leaders and thoughtfully expanding globally where we have poor models. NuCom entertainment of synergistic or rather symbiotic as media flows one way data the other and both learn from each other focused on serving one consumer an ecosystem.

Think more a bit like Amazon or Alibaba or Tencent, Uber, Prime. On Slide 28, clearly how we tackle entertainment is to core challenge and we’ll spend most of our time on this.

Before I do this, I deliberately wanted to spend five minutes on NuCom. We’ve really exciting plan on story and with entertainment on NuCom coming closer together this is and will be even more so an integral part of the portal routes future.

Today NuCom is a $0.8 billion revenue, $110 million adjusted EBITDA business with about $35 million monthly business. We’re focusing on four big consumer needs and verticals.

Consumer advice and saving money with very walks over 20 years as $2 billion for 10 million customers. A strong number to in a vast market that has almost limitless growth potential.

[indiscernible] number one in Germany with the correct team and business model and don’t well all want to fall in love. You can try some mightiest group creates experience at last and also clear market leader and [indiscernible] consumers beauty needs going 40% just this year.

And indeed if you look in the beauty market new comers as a percent of total beauties only 5% in Germany where its 10% plus in the UK, 25% plus in China. Now this business is a count for 75% of NuCom’s revenues and can become unicorns in their own right.

And of course, we have more businesses in the portfolio and over time see one or two other breakout opportunities. So on Slide 29, our game plan is to turn this into a EUR 2 billion revenue, EUR 400 million adjusted EBITDA business over five years or so.

And we think we can largely do this organically, but also have a rich disciplined M&A pipeline, Jan commented earlier on eharmony, which I think is a great deal at great value for the future. Our organic growth for NuCom will be around 10% to 15%, possibly slightly better and with M&A closer to 20%.

The business is fully operational. We have strong leaders, great partnership with General Atlantic.

And if NuCom delivers on the plan, clearly, a major value creator for the group. Now on Slide 30, this value creation also rest on leveraging and further developing the synergies between NuCom and our Entertainment business.

Think of it as we serve large consumer needs through both businesses, learn more about our consumers, leverage data and can jointly fuel new business models. NuCom is our biggest advertising client, strongly benefiting from our media power while entertainment learns our consumer data-centric approach from NuCom to pick just one example.

So now with Slide 32, let me move on the critical core of ProSiebenSat.1. Our Entertainment business has much strength to build on, even if we don’t put all the pieces together today quite the way we want and quite for the growth we want.

But we have entertainment brands consumers love with large fan audiences, a great distribution portfolio and very strong ad sales capabilities. Today, entertainment is a EUR 2.7 billion business that is flattish to slightly negative, and we want to accelerate and deliver solid growth, at least in line with and rather ahead of the past.

And we’ll get there by doing 4 things: One, create more relevant content; two, make this available on a much broader footprint; three, create better balance of advertising with distribution and subscription models; and four, possibly most importantly create smart reach and advertising products at scale. Slide 33 is our guide track.

Consumers to content, to reach, to making money, only in that order. Now let me move to content.

We’re expanding in attractive life and local genre for more factual to shows, to comedy, to fiction and transports. We have more unique programming coming online this fall and into 2019 than in many years and are seeing meaningful ratings growth.

We’ve under invested in local content in past, so we’ll commit an incremental EUR 80 million from 2019 onwards. On to Slide 35.

Now we’ll continue to rely on a mix of relevant U.S. content and local creation, and we think this balance is important for the future.

Great U.S. films and series work well and are wanted by our viewers.

But we need better balance. We have too much inflow from these past, and at the same time, lower airing success rate on some of the content without the digital right scope needed.

Yet, we also need to secure content access at the right cost for the future. This has been under intent scrutiny with a dedicated team.

We just closed negotiations with Warner, our most important and trusted partner that adjust inflows starting already for 2019, provides better qualifiers and rights at stable pricing. This is a good success.

Nevertheless, we have overhangs from the years past that need adjusting ones. We’re talking about up to EUR 400 billion of overhang, and we’ll deal with it until the end of the year when all negotiations are done.

We’re working through the most effective treatment of this from simple write-down to other options. The cash impact of this is a maximum of EUR 110 million.

And importantly, this will remove any content overhang liability as we go forward and takes risk and uncertainty off the table. Let’s move from content to reach on Slide 36.

I have a simple premise, to move the business from being largely focused on TV reach to being focused on total reach, a.k.a. linear and digital with aggressive reach expansion digitally that we turn over time into smart reach and product with much better advertiser benefits and yields for us.

If we can do this, we will have a future for the entertainment footprint that benefits from the changes in viewing behavior versus the terminal value model some analysts apply. Now let me just give you one example.

Germany’s Next Topmodel, one of our lighthouse franchises, has a fan base of, give or take, 10 million passionate fans. Already, 25% of total viewing is digital and more than 10% of the net unduplicated reach is digital.

The number one entertainment brand on Instagram. Clearly, not all our programs are that sticky.

Otherwise, we grow leaps and bounds. But as we invest more in local content and increase our investments in digital platforms, more of our business will behave this way.

Slide 37. So we’re really mounting in all our digital attacks from building and boosting fan communities to 7TV as our German, who’ll aggregate our platform to expanding Studio71, which is already one of the leading digital channels and video providers, both in Germany and the world with 10 billion monthly video views.

On Slide 38, let me spend a moment on 17 years. You and others are asking many good questions.

This is our streaming play to capture 10 million or more unique users and offer one German entertainment hub that has all the channels and content brands you love in one place. Today, we have around 2.5 million users and subscribers, and that’s really with current product versus the one we’re building for the future and virtually no marketing.

As you know, there’s a 50-50 joint venture with Discovery, and we have an open invitation for everyone to join. Discussions are ongoing.

And clearly, it makes no sense, for example, for LTL and us to spend competitively when we could join forces. Discovery, and we will invest in 2019 to create the leading German entertainment hub.

We have a team of 200 plus working hard on the product and expect to launch for mid-next year. Now let me talk about how we make money and generate growth with all of this.

There’s a lot of work going on to better serve agencies and clients, optimize yields and contract flows, and Sabine will cover this in the Capital Markets Day. I wanted to focus on three examples.

Slide 39. One, we’re building an advertising portfolio that can serve advertising needs, both across the advertising to engagement to conversion funnel and across all media needs from TV to digital to out-of-home and performance.

Two, on the next slide, we’re monetizing both via advertising and a much broader value chain that ranges from licensing to sponsoring to events. And if you look at the Germany’s Next Topmodel example I referenced earlier, close to half the revenue already comes from nonclassical and more differentiated products.

Slide 41. Three, by going all in on smart reach.

Our smart reach or addressable, as many referred to it, describes reach that can target based on data insights, thus, geolocate and/or individualize consumers we address. So advertisers can serve more relevant information to the right people.

20% of our TV inventory can be smart today, that’s 12 million TVs on 39 million households, all digital reach of smart by definition. Imagine your car company launching a new car, we can mount you a national campaign, but also provide a banner window that links to every local car dealer across this reach, creating uplifts of 50% to 150% in reach monetization.

Remember the EUR 21 billion advertising market I referred to, well, if we commercialize smart reach at scale, we can shift more of existing and new budgets into video-moving pictures, which is by far, a more effective mode of advertising than print or digital banners or really anything else. Now are we doing this at scale today?

No. But the technology is there, the advertising need is there, and we’re now very focused on building the products, teams and client pictures to scale this fast.

And If we can do that, we can reach 75% of all the EUR 21 billion in advertising money out there. Slide 42.

All right, if we then take all this and have a look at the entertainment building blocks, we have an ambition to develop our current EUR 2.7 billion revenue, EUR 0.9 billion EBITDA business to EUR 3.2 billion at about EUR 1 billion adjusted EBITDA. We’ve taken very conservative underlying assumptions on the core TV advertising market.

So we take into account that it may well decline by 1% or 2% a year. Hopefully, a little better.

But then growth comes from better managing, advertising use in products, digital reach, smart reach a.k.a. addressable and products, distribution and advertising technology levels, some small M&A, altogether going at least at the 2% to 3% rate, and hopefully, at the upper end, all-in once the building blocks grip at scale.

44. Let me briefly cover Red Arrow Studios before I ring it all together for you.

Red Arrow Studios today is a EUR 600 million business, EUR 500 million with external customers with really 3 activities; German content creation, international studios and distribution and Studio71. On Slide 45, we have a clear and focused plan forward for Red Arrow Studios.

One, to develop a bigger German footprint by partnering with the best creative minds and thus, increase the share of local commission content from above 13% to 30% or more in the future. This, by the way, is a real opportunity for the whole German create of scene.

On our core international business, we have a better slate of signed-off productions coming into 2019 from Bosch Season 5 for Amazon, the New York Times, the weekly for FX and Hulu, deep state for Fox, [indiscernible] to mention just a few examples. and we’ll work hard to make the business sharper in delivering growth at an adjusted EBITDA level.

And by the way, we continue to be open to explore strategic partnerships. Now on Studio71, we’ll actively look to expand.

It’s the TV of the future, and we have a front seat. So if you then look at Slide 46, if we do this, we’ll develop from a EUR 0.5 billion to a EUR 0.8 billion external revenue, EUR 1 billion if you include internal.

We’ll work on our profitability by driving core production assets, anticipating Studio71 to be positive and leveraging cost efficiencies at scale. We aim to deliver organic revenue CAGRs of 5% to 10% and around 10%, including M&A.

48. Let me wrap this all up with a few slides on how it comes together and how we’ll operate.

I wanted to start by reminding you what the goal is, EUR 4 billion to EUR 6 billion, EUR 1 billion to EUR 1.5 billion, 50% on advertising, 50% digital, 25% smart product, 10% to 15% total annual shareholder return. 49.

Now what does this mean in terms of guidance? Well, I look at this closely, and frankly, we’ve not delivered on guidance.

So instead of playing around with this, we’ll hold guidance targets and focus on executing and delivery. My ambition is certainly to deliver at the upper end of these numbers, and I’m confident the strategies and plans we laid put can do this.

It will take a bit of time. On 50, if you look at the building blocks, you can see what we laid out coming together.

We’ve modeled this with a variety of conservative to more aggressive assumptions, and I’m confident this can be done. All 3 segments contribute meaningfully.

51. Now 2019 will be a year of sorts as we absorbed the investments critically needed for our future.

All in, I’m confident we can return entertainment growth in 2019 and accelerate thereafter. But we need to make EUR 120 million of investments in the business from local content to digital and tech.

Against this, I’m committing another EUR 50 million of run rate cost savings by reducing, for example, the number of legal entities, making our holding structures leaner, both on segment as well as on group level, reducing external costs and adjusting expense of controls, management layers and so forth. So that the earnings impact in the Entertainment business will be around EUR 70 million only.

And then on group level, our adjusted EBITDA should be impacted less as NuCom and Red Arrow Studios will deliver earnings growth. Of course, we’ll be very diligent in how spend investors’ money and we’ll work hard to do above or better.

53. To support this growth trend, delivering 10% to 15% fees up per annum, we also relook at cash capital allocation.

Going forward, we will fix dividend at 50% of adjusted net income so that we return half earned straightaway to investors while investing the other half for future growth. This balance is still very attractive yield of around 5%, with accelerated EPS growth behind organic, smart M&A and share buybacks.

We confirm our leverage target range of 1.5 to 2.5 and would only consider going above this for large deals with a strong strategic fit and rationale. Now to our current share price levels, the board and I believe the company is meaningfully undervalued.

So we’re announcing up to EUR 250 million share buyback plan over the next 12 to 24 months. We have strong conviction in our strategy and plans.

And given the valuation, opportunistically deploying capital on this is the smart thing to do. We’ll commit EUR 50 million until year-end, and we’ll periodically relook at this depending on whether organic and M&A opportunities materialize as planned.

I will put more of my money into ProSiebenSat.1 immediately post the blackout. All in, as they say.

54. So how will we actually get all this done?

One, we have a clear game plan and are focusing all we do on execution; two, we have a sharp capability leaders in all three pillars accountable to me; three, we’re simplifying how we operate, much progress already and much to come; four, we’ll be disciplined in how we use cash, it’s the investors money, and I take this stewardship very serious; five, we’re partnering for more scale from General Atlantic and NuCom to netID to European Broadcaster Alliance. I’ve built personal relationships across the industry, and we’re looking where we can synergistically pull efforts and resources; and six, we’re reviewing and building our tech capabilities.

On 55, to sum it all up. No white rabbits, but a clear growth plan, building blocks and commitments.

Future fit entertainment, more local, digital and smart reach. Rapidly scale NuCom and Red Arrow Studios.

All synergistic, all serving our consumers and viewers with great content brands and services. Now let me close on a personal note.

I took on this role because it’s a great challenge, and what I found confirmed my personal investor thesis: a business with great bonds, people and strength, that needs more focus, execution and pivoting into the future fearlessly. You get every ounce of the team’s and my energy and intellect.

It will be hard work, but it will be done. Now I will personally engage with investors to explain what we’re doing and how we’ll win.

So please don’t miss next week’s Capital Markets Day because I think it’s really important you hear the team and you see good detailed plans which are very sharp, and we spend very hard work in getting ready over the last few months, and you can ask all the questions you have. Then I’ll be in Barcelona with many investors and on the road, thereafter, to engage in even more depth.

Thank you.

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